Gold mine stocks attractive in turbulent times

With gold prices nudging their all-time high and energy and other costs falling, mining company profit margins are widening, making their shares attractive, analysts said on Thursday.

"Within the next year, we will see the gold stocks sell at significant premiums to traditional earnings measures or net asset value measures," said Robert Lutts, chief investment officer of Cabot Money Management in Salem, Massachusetts, which manages $400 million (280 million pounds) of client assets.

"I have owned Barrick Gold for one reason only -- because it has the biggest pile of gold in the ground," Lutts said of the world's biggest gold producer, Canada's Barrick Gold.

"New interest continues in this increasingly attractive sector," JPMorgan analyst John Bridges wrote in a note. "We feel all funds should have a core long position in the metal or the equities."

Moreover, analysts expect acquisitions in the gold sector to accelerate, as larger players pounce on their cash-strapped smaller colleagues, in a bid to grow their asset base.

"I believe in investing in both bullion and stocks," said Jeffrey Nichols, managing director of American Precious Metals Advisors. "Large companies with strong cash positions are in a good position to take advantage" of a higher gold price.

Lower fuel, raw materials and equipment costs, combined with weaker Canadian and Australian dollars and a flight to gold as a safe haven, have spurred gold miners' stocks recently.

The gold and silver index, which comprises major U.S. and Canadian gold mining stocks, has more than doubled over the last four months. Spot gold was selling for $978.80 per ounce in New York on Thursday, closing in on its all-time high of $1,030.80 from last March 17.

"At these levels, we'd encourage new investors to begin by buying a little Newmont," Bridges wrote, after Newmont Mining Corp, the world's No. 2 gold producer, reported better- than-expected fourth quarter results.